The Dreaded Thailand 4:1 Employment Ratio

Have you performed all the steps for your company registration in Thailand? Are you ready to rent an office and hire some employees? Do you have your eye on a few well-qualified expats to fill the newly-purchased empty desks beside you? Well, before you can hire any foreign staff for your Thailand-based company, you need to employ some Thai staff as well. Plenty of them.

The Basics

If you aren’t familiar with Thailand’s 4:1 employment ratio, it works like this: For every non-Thai employee you hire, you need to employ four Thai staff members as well. So, if you want to hire four foreign employees, you’ll need to hire 16 Thai staff to meet the employment ratio requirement. Time to buy some more desks!

Reasons for the Law

The reasons for this law are fairly sensible and straightforward, though they tend to drive some company owners mad. The company owners feel that they are just “filling desks” to meet the ratio requirement when they have no need for the extra staff.

However, the law is in place to keep the Thai unemployment rate down.The government has deemed that, if you want to have foreigners working for you, you must provide jobs for locals as well. It makes sense that the country wants to ensure that jobs are not being taken away from Thai nationals and given solely to foreigners.

Any Way Around It?

If you haven’t yet performed your company registration in Thailand, perhaps your can consider forming a Regional Operating Headquarters (ROH) in Thailand while the company is actually held in another country. ROH companies can include regional and representative offices for all kinds of businesses and, for some companies, they are the ideal setup. For companies that hope to keep their staff, overhead and operations lean, the ROH option is becoming increasingly popular.

If your company qualifies for Board of Investment promotion, the ratios of foreigners to Thai staff is set based on the companies needs, not a regulation.

Things You Can’t Do…

People will often ask if they can employ several Thai staff part-time in order to meet the 4:1 ratio and hire their expat employees. The short answer is no. To hire a foreign employee you must provide verified documentation of your Thai staff and their pay slips as well as tax records for them. You must prove that both you and they are paying their taxes. As a company owner, you must pay the mandatory social security tax on each Thai employee working for you. That tax must be based on, at least, regular, full-time, minimum-wage employment (taxed on wages equalling 300 baht per person per day).

Have questions about employees, work visas, tax issues, company registration in Thailand, corporate litigation in Thailand or other legal matters? Contact Silk Legal today. We offer a full suite of corporate law services.